Europe Explained

Oil can be flowing and still be expensive, and that is the puzzle behind this week's fuel prices. Al Jazeera reports that Gulf oil is leaving in larger amounts than before the war, yet the cost of getting it to buyers has jumped. For UK and European governments, that cost eventually lands on households.

Start with the journey. Because the Strait of Hormuz is risky, shuttle boats carry oil through it and load it onto tankers off Oman and the United Arab Emirates, outside the danger zone. Kpler says over 70% of the crude crossing the strait used this method in August. Pipelines add another way around: in September 40% of Gulf exports bypassed the strait, up from 17% before the war.

Next, the bill for that journey. Freight costs have reached about $40 per barrel, roughly ten times the usual rate, according to LSEG data, as insurance and logistics costs climb. The risk is real: the UKMTO logged 32 attacks on commercial vessels in October, the deadliest month since the war began.

Then, the cushion. The IEA says observed global stocks fell by 10 million barrels in September and sit 509 million barrels below pre-war levels. Fewer stored barrels leave less to calm the market if supply wobbles.

Europeans should not expect a quick fix. Brent futures for October 2027 were above $90 a barrel on Friday, which suggests markets expect prices to stay high for a long time. Analyst Isabel Figuerola-Ferretti says a return to $70 would need lasting de-escalation, normal shipping through Hormuz, rebuilt stocks and freight back to normal.

That matters on this side of the world. In the UK, a one-off 100 pound payment is going to 20 million households as gas and electricity prices rise, and Italy approved a 175 million euro package for truck drivers, farmers and fishermen hit by fuel price increases.

A Budget is the Chancellor's statement of how the government will raise and spend money. On 28 October Chancellor John Healey delivered the first of Prime Minister Andy Burnham's government. Burnham replaced Keir Starmer in July.

Households get direct help. A one-off 100 pound payment goes to 20 million households as gas and electricity prices rise, largely because of the Middle East conflict. Fixed fees on gas bills will go and the fuel duty freeze is extended.

To help pay, Labour will double the surcharge on UK bank profits to 6% for 15 months from January, which the official forecaster, the OBR, estimates will raise 1.5 billion pounds.

Room to spend is small. Fiscal headroom for 2029-2030 falls to 15 billion pounds from 23.6 billion in March, as higher borrowing costs raise debt repayments. Healey said 'Fiscal discipline is my first commitment' and kept Rachel Reeves's fiscal rules.

While protests dominate the news at home, European leaders have also been looking abroad for partners. On Friday 30 October, Carney, Costa and von der Leyen launched what they called an Alliance for the Future at a summit in Montreal, where Canada and the European Union (EU) sought deeper ties.

The deals are practical. The European Investment Bank will invest in critical Canadian resources, particularly raw minerals, which are materials taken from the ground. A digital trade deal was also signed.

Ukraine is part of the package. Canada said it would join the EU's 90 billion euro support loan for Kyiv.

Al Jazeera frames the summit as a response to worsening global uncertainty. How much the bank will invest has not been reported in our sources.